Looking at the World Post Ukraine

The war will eventually come to an end, and no matter how it ends, the world will be somewhat changed

The end of the post-Cold War era: Russia-Ukraine conflict reshapes the  entire world order. Pic – Al Jazeera Center for Studies

By Anil Madan

Vladimir Putin’s war of destruction against Ukraine rages on. Western media reports and pundits cheer the Ukrainians’ valiant resistance to the point of claiming that the Ukrainians are beating back the Russian onslaught and “winning” the war. Whether the Ukrainians are on to victory, or these pronouncements are just wishful thinking—or even that Russia will, at a minimum, stop or be stopped—remains to be seen. On many fronts, the truth is that the Ukrainians are being pummelled by the blunt force of indiscriminate artillery shelling and airborne bombing. Pentagon Press Secretary John Kirby warned that Russia still has a substantial amount of its firepower available.

As we ponder what a post-Ukraine-war world might look like, it is fair to ask if the inquiry is premature or must await the end of Russian shelling and bombing. Certainly, the war will eventually come to an end, and no matter how it ends, the world will be somewhat changed: there will be some reset of geopolitical alignments, brakes will be applied to the forces of globalization, the rules-based order, or at least our perception that there is a rules-based order to some degree will need rethinking, and perhaps tribunals will be constituted to consider accountability for war crimes most likely holding trials in absentia. 

We cannot yet define the contours that will mark the end of the war. At the most basic level, we do not know if Putin will agree to a ceasefire without significant concessions by Ukraine amounting to a de facto surrender or at the point when its cities have been reduced to ruinous rubble, its male population decimated, and its displaced women and children unable to return to their homeland and carry on their lives before a massive rebuild of infrastructure, homes, services, and civil society takes place. We do not know, except in broad generalizations what the terms of any ceasefire acceptable to the Ukrainians might be. What we know is essentially some of the Ukrainian and Russianwish lists. To underscore the point, indeed, we cannot tell if the Ukrainian leadership will survive the assault staged by Putin, nor foretell the shape of the nation that will emerge. 

Putin’s statements the day before the Russian invasion began that any attempt by other countries to interfere would lead to “consequences you have never seen” was widely interpreted as raising the specter of nuclear weapons. Since then, Russian spokespersonsPeskov and Medvedev have stated that Russia would use nuclear weapons if an existential threat to Russia is perceived. Pentagon and NATO spokespersons have warned that Putin might be preparing to use chemical or biological weapons and might conduct false flag operations to justify the same. If any of these horrors come to pass, what comes next is difficult to project. Perhaps it is best to avoid speculation in this respect.In the meantime, with the hope that the world does not see such extremes,let us try to discern some of the changes we might see across the world.There has been much pontificating going on amongst the armchair pundits. The chirping follows some broad themes.

First, there is the I-told-you-so crowd that says the US and NATO countries are at fault for pushing Ukraine into a war with Russia by holding out the promise of NATO and EU membership when those were known red lines for Putin.

Second, there are those who declare an end to globalization.

Third, there are those who envision new alliances. One pundit actually wrote that a new India-China alliance could be in the offing.

Fourth, there are ominous warnings that Russia’s invasion of Ukraine telegraphs a Chinese invasion of Taiwan.

Fifth, there is the cadre of pundits, some cheerfully and others fearfully, marking the end of America as a world power and an end to the Western notion of a rules-based order. This last group projects the end of the US dollar as the world’s reserve currency, and the emergence of payment systems and trading denominated in currencies other than the dollar.

With respect, I suggest that we shouldnot put too much stock in any of these ramblings and rumblings of projected geopolitical tsunamis and earthquakes. It is better, in my view, to think of the geopolitical forces as akin to tectonic plates slowly grinding against each other, threatening the coming of THE BIG ONE, but in the meantime, offering up lesser temblors and quakes, some of them serious to be sure, but loweron the Richter scale.

1. Much of the blame game against the US and NATO members smacks of apologists for Putin and his illegal invasion. Putin’s laments about NATO at his doorstep have always been illogical and makeweight. NATO is a defensive alliance, not an organization about to project itself into Russia in an offensive way, certainly not via a ground offensive. If Putin were worried about missiles and aircraft, there is very little difference between having them in Germany or France versus Poland or Ukraine. Most importantly, no NATO offensive could be orchestrated or maintained without the US leading it. The European countries, even with Britain, do not have the firepower to take on Russia.

Perhaps what these apologists do not opt for the simpler explanation that Putin’s invasion of Ukraine was really driven by hispreviously articulatedviews thatUkraine is not legitimately an independent nation but rather should be an integral part of Russia. Perhaps he correctly understood that with Germany and other European countries dependent on his supplies of oil and gas, no meaningful military response from NATO countries was in the offing. Perhaps it was predictable, as I have previously stated, that Putinwould see inPresident Biden’s warning that all he would face would be economic sanctions if he invaded Ukraine, a safe path to attacking that country without invoking the wrath of NATO.

To be sure, as I have previously stated, the US and its western allies slipped up after the collapse of the Soviet Union, when NATO was not only allowed to remain in existence but expanded to include Eastern European countries that had previously been in the Soviet orbit. There was arguably no need for NATO after the end of the Soviet Imperium. But now, Putin has validated the raison d’être for NATO. 

Most importantly, no one could have predicted that Putin would undertake a brutal war of attrition against a people he professes are no different from his own countrymen. This kind of aggression and indiscriminate bombing were surely not in anyone’s calculus, certainly not in the imagination of any armchair pundit. On the other hand, it seems almost a given that in order to bring an end to the Russian bombing and shelling, Ukraine will have to pledge neutrality and abjure NATO membership.

2. The end-of-globalization pundits are laughable. Ever since US companies outsourced their manufacturing to China and transferred associated technology, machine tools, and control software to get the benefits of increased profits from cheap labour, the realization has come slowly that the US has become captive to Chinese supplies. Sure, the manufacturing and technology can be transferred to other countries that have cheap labour but building factories, whether in Vietnam, India, or Kenya, for example, will be expensive and take years to complete. It does not make sense to think that American CEOs will suddenly engage in long-term planning when all they have demonstrated is short-term greed. Nor is there any indication that almost three quarters of a billion dollars’ worth of annual trade between the US and China can suddenly disappear and be relocated in short order.

What we may see is a series of moves by American companies aimed at diversifying their manufacturing sources. But don’t expect any significant relocationsfor the next decade during which American companies will determine if secondary sources are reliable, cost-effective, and capable of letting them establish independence from China. Simply put, American companies and America as a whole, are far too reliant on China as a manufactory.

3. In terms of new alliances, one hasmust to ask the question why a new alliance is necessary when shoring up an existing one will do? Certainly, there has been a fracturing of the US-UAE, and US-Saudi relations and strains on the US-India, and perhaps the US-Israel relationships. We can already see that new alliances are being formed in the Middle East as Israel hosts the UAE, Bahrain, Morocco, and Egypt. It will not be too long before Saudi Arabia joins.

We see that Germany plans to increase defence spending and acquire defensive missile capabilities. Japan and South Korea may seek anti-missile systems or even nuclear capability to guard against North Korea. But their broader alliances with the US will remain in place.

The existential threat that a nuclear-armed Iran poses to Israel is well known and obvious. That the Sunni Arab countries of the Gulf fear Iran’s evolving troublemaking has been a story long simmering on the backburner but one that becomes more urgent as the Biden administration seems about to renew the Iran nuclear deal. It is not so much the nuclear deal but the vast sums of money that Iran will have at its disposal to fund proxy militias and troublemakers that will cement ties between Israel and its Arab neighbours.

India has already cast its lot with the US, Japan, and Australia as a member of the Quad. To be sure, India’s less than principled stand about condemning the Russian invasion of Ukraine may be understood as a need to preserve relations with its supplier of aircraft and missile defense systems. But India is not about to form an alliance with China any more than it is about to become a Russian satellite. The fact is thatif both are to counter China’s rise in Southeast Asia, India needs the US and the US needs India.

4. A Chinese invasion of Taiwan is probably no more nor less likely based on Russia’s adventure in Ukraine. The Chinese have made it clear that their one-China policy is every bit dogma as it ever was. They promise eventual reunification with the use of military force if necessary. As of now, the conventional wisdom seems to be that China is not capable of mounting a successful naval invasion. President Xi Jinping is no Caesar ostensibly thrice refusing the proffered crown and instead looks to be crowned Emperor forever later this year. He will not soon risk an invasion of Taiwan. 

The Chinese calculus is that the US is a waning power, getting weaker by the day, a nation riven by internal dissension, a floundering democracy unable to get anything done and a people stricken with problems, crime, poverty, drug abuse, and a poor healthcare system. Xiwill bide his time avoiding any moves that might awaken and rejuvenate the American beast.

5. Finally, we come to the notion that America’s reign as a superpower is at an end. One has only to point at Russia, the successor to the failed Soviet Union to see that dismissing a nuclear armed nation with a reasonably well-equipped military and the will to use its forces, is folly. The US may have fewer nuclear warheads than Russia, but nuclear weapons are not the issue. The possession of such weapons by a superpower is simply for purposes of deterring other superpowers. And we have seen Russia’s veiled threats about using nuclear weapons achieve that purpose.

On the other hand, the US has significantly more deadly conventional arms deliverables and more high technology capability than any other nation. That capability will loom large. The US will long be in a position not only to defend itself but to wreak havoc on any country that poses a serious threat to the homeland. It may well be that the US will be reluctant to use its forces on behalf of other countries.So far, there has been no occasion in the current context to invokeNATO’s Article 5 and test that commitment. Certainly, China and Russia have no desire to go seeking the answer to that question.

America will remain a formidable military power for a long, long time.

But what of America’s economic standing and what of the dollar and international trade? There is no question that with mounting deficits and fraying relations with other countries around the world, the dominance of theUS on the international scene is slipping. Certainly, China’s remarkable growth over the last three decades makes it a formidable competitor. But will China be able to displace the dollar and the entrenched systems that make up the financial matrix undergirding international banking and commerce?

To some extent, we will see shifts from the dollar to other currencies. This will certainly happen with trading in oil, gas, and other commodities from Russia and perhaps with Iranian oil until sanctions over the Iran nuclear deal are lifted. It has been reported that Russia built its Mir credit card payments processing system that handles 100 million domestic cards as well as cards in the Mastercard and Visa networks. The availability of technology to all nations will limit America’s ability to control the vast financial networks of the world. But we should not expect major inroads here.

The saying “democracy is the worst form of government except for all others,” often attributed to Churchill, comes to mind. The dollar-based trading system and banking channels may not be perfect, but there is hardly a viable universal substitute for them. China simply does not have the bond market to deal with the demands of the world. To be sure, as noted above, we will see isolated instances of trading for oil from Russia in Yuan, Rupees, or Euros. But ultimately,the workability of such alternatives will likely be dependent on China’s ability to pledge its vast holdings ofUS Treasury securities to guarantee payments. Ultimately, this will be an indirect dollar-based mechanism.

And what of the trillions of dollars of Chinese investments in the U.S.? Are the owners of those assets really looking to cause a crash in the American economy to their own detriment? The question does not bear answering.

One final point should be kept in mind. Although the nations of the world profess to be driven by the imperative of weaning themselves off fossil fuels, even the most ambitious goals have fossil fuel usage continuing to 2030 or 2035 and some countries such as India and China do not promise zero carbon until well past 2050.

What this tells us is that oil and gas will remain critical resources to meet the world’s energy demands for at least another fifteen years for the most ambitious nations. Fifteen years is a long time and in gross dollar value, over that span of time, we are looking at trillions of dollars worth of business activity. The bulk of that will be transacted in dollars. And, in due course, Russia will benefit from being a major player in energy, wheat and other commodities.

There is plenty of time for America to right its ship. There is plenty of time for China and Russia to make missteps. 

In short, we do not know what the outcome will be other than that we shall be changed. In this regard, a final thought is in order. Germany and Japan were enemies of the US in World War II. Russia was an ally. Today, the former two are close allies and the latter is the foe. Things change. Putin will not be around forever. It is not unthinkable that new leadership in Russia will seek rapprochement with Ukraine and indeed even finance a rebuilding effort à la the Marshall Plan following WWII.

Cheerz…
Bwana

* Published in ePaper 1 April 2022